5 Mortgage Tips for Reducing Your Mortgage Costs

Mortgages are just one of many stressful things to take into account when buying a home. The toughest things to deal with are the high costs associated with getting a mortgage and the long-term commitment that comes with signing the dotted line.

Best Rate – First and foremost, you want to secure a good rate. To do this, you need to shop around and do your homework. You wouldn’t pick the first used car you see, pay the dealer and drive off, would you? So why go with the first mortgage offer? You don’t need to stick with one financial institution just because you’ve been banking there your entire life. Go with the lender that offers you the best interest rate and a mortgage solution that works for you. 

Credit Scores– Now is the time to be on your best behavior. Make sure you remember to settle up all of your outstanding payments; this even includes your credit cards at big box retailers or department stores. Small amounts that don’t seem like they matter can have huge consequences if you don’t take care of them before applying for a mortgage.

Borrow Limited– You can do this easily by maximizing your down payment. The more money you have to put down means a lower loan amount and potentially a lower interest rate. Ideally, you should be prepared to put 20% of the purchase price of the home down. However, 10-15% will still have a positive impact.

Payment – An easy option would be increasing your payment frequency. If you can switch from making monthly payments to accelerated bi-weekly payments, you’ll pay your mortgage off sooner and end up saving money in the long run. 

Refinancing – Refinancing your mortgage is an effective way to save money if the opportunity to secure a lower interest rate comes up. Be aware: you will incur a penalty for refinancing your mortgage – typically three months interest. There may be other penalties associated with refinancing, so it’s important to ask for a “payout summary” which outlines exactly what you will need to pay. This summary could stop you from making the wrong decision.

Once you have completed the refinancing, you have two options. You can keep the amortization period you had on your previous mortgage and make lower monthly payments or you can continue to make the same monthly payments, which will allow you to pay off your mortgage in a lot less time and allow you to own your home outright sooner.

Do you have more tips on buying a home, leave us your suggestions in the comments section below. 

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